Market News

Barclays Bank, an international bank is advising investors to recalibrate their exposure to Nigeria’s shorter-to-medium dated dollar-denominated bonds, and away from long dated bonds according to a report by Bloomberg.

The recommendation, coming from analysts led by Andreas Kolbe, suggests a shift away from longer-dated Nigerian eurobonds, noting that the mid-section of the yield curve now presents a more compelling value proposition. Barclays maintains an overweight stance on Nigerian  Eurobonds.

However, Kolbe said that Nigeria’s yield curve has not mirrored the “steepening momentum” seen across other emerging markets.

In these markets, shorter-dated bonds have typically experienced more significant rallies than their longer-maturity counterparts.

This difference, Kolbe said, leaves ample room for Nigerian shorter-dated securities to “play catch-up.”

Barclays is recommending clients consider switching out of the bonds maturing in 2049 and into the 2033 paper. 

The bond due Jan 2049 is trading with a yield of about 10.8 percent, while the Sept2033 issue offers 10.4 percent. Yields on both bonds have slid more than 100 basis points since early-April as easing trade war tensions lifted emerging-market assets.

Analysis by Barclays shows that the Z-spread between the 2033 and 2049 issues has unexpectedly flattened by approximately 25 basis points year-to-date.

This flattening, he explains, means the long end of the curve “screens as too flat relative to the front-end” when compared to typical high-yield emerging-market debt curves.